"Bancassurance."
Today it's just one of commercial banking's more peculiar contributions to corporate jargon.
But in a few years, bankers hope, it could be the next great source of fee income.
Granted, it may seem somewhat pretentious for American bankers to have appropriated a European banking term to describe their industry's foray into the marketing of insurance policies.
Indeed, during a conference held last week in a classroom at the Wharton School in Philadelphia, a few of the dozen bankers assembled could be heard drudging up their faded high school French accents in a vain attempt to pronounce it.
But borrowing a European catch phrase seems appropriate in this context. It's the European banking community that has taken the marketing of insurance products the furthest, thanks to highly favorable legal and regulatory environment that even allows for underwriting.
And while the regulatory environment in the U.S. is hardly as accommodating - national banks are generally limited to selling only a few lines, such as credit, disability, and title insurance - the expectation is that things will only get better, given the pro-deregulation atmosphere in Washington these days.
During the one-day conference - sponsored by Unysis, a technology services provider - it was two European bankers who did most of the talking about their experiences. The Yanks sat back, attentively taking notes.
And the man who got most of the attention was a small, bespectacled 31- year old Briton named Paul Feeney.
Mr. Feeney, who holds a doctorate in finance, left a junior teaching post at the University of Cambridge in 1987 for a career with U.K.-based National Westminster Bank. In 1991, he headed a project to develop an insurance arm of the bank that evolved into the largest bank-affiliated insurance business in Europe.
Recently, this banking boy wonder was lured to this country by Natwest's U.S. operation - based in Jersey City - to run its fledgling insurance enterprise.
During the day-long conference, the puckish executive commanded the attention of a mostly older group of men and women as he regaled them with stories of his own success and advice for their operations.
"Bancassurance is much more than just the sale of life insurance to banking customers," Mr. Feeney told the group. "It's a business philosophy encompassing insurance, investment, savings and banking products."
"From what I've seen so far, true bancassurance doesn't exist in America."
Mr. Feeney said that U.S. banks, by and large, suffer from a product orientation which has inhibited cross-selling of loans, investment products such as mutual funds and annuities, and insurance. For his philosophy of bancassurance to thrive, he said, a bank needs to organize its marketing apparatus by customer target groups.
"For instance, a small-business financial advisory service, a home purchase service, a retirement service, and a family financial advisory serve," he said.
That way, for example, when someone walks through the door of a bank to apply for a home mortgage, he can also be solicited for property and casualty insurance.
As Natwest Bancorp's senior vice president for insurance, Mr. Feeney is about to apply his strategy to the New York and New Jersey market. He has taken the first step, chartering an insurance agency in Delaware.
Though Natwest currently has limited offerings of credit-rated insurance policies, he hopes to soon begin marketing life and health insurance through the bank's 350 branches.
But Michael White, a Radnor, Pa.-based consultant who helps banks set up insurance programs, thinks Mr. Feeney may be facing his biggest challenge yet.
"At this stage of the game, I'm not sure that Natwest has the size, with only 300 branches, to develop a profitable business," he said.
Nevertheless, Mr. White suggests that the Briton's intellectual leadership in this area is sorely needed here. "All the banks in this country - even the large ones - are waiting for a leader," he said.
Like Mr. Feeney, Mr. White argued that U.S. banks, in their effort to build up mutual funds and annuities businesses, have developed "transactional" sales forces that are ill equipped to distribute insurance products, which take more time and customer hand-holding to sell.
Though conventional wisdom would have us believe that a tough regulatory climate has kept U.S. bankers from taking the insurance business more serious, Mr. White argues that many banks could do far more than they are doing. After all, state-chartered banks have the power to market a wide range of insurance products underwritten by insurance firms.
Moreover, his research suggested that banks are in a position to exploit a large market of uninsured Americans who have been poorly served by traditional insurance agents.
Data he has compiled suggest that insurance agents - because of the relatively high incremental costs of securing a new client - concentrate on big-dollar policies for upper-income clients. As a result, the distribution of life insurance policies is heavily skewed to those with incomes over $75,000. Meanwhile, life insurance ownership among the middle and lower classes has decreased during the past decade.
"It's not a demand problem, it's an access problem," Mr. White said. "Agents are just not seeing people."
Conversely, banks - because of their branch networks - are much closer to middle class and working class Americans. More important, their incremental costs of selling insurance products to a bank customer are significantly less than the costs insurance agents face.
"The biggest impediment banks have is in their own heads," Mr. White said.
E. Kenneth Reynolds, a senior vice president with NationsBank, was typical of the dozen or so American bankers who sat in the audience. His company, based in Charlotte, N.C., offers a limited range of policies - but has ambitions.
"What we are trying to do is learn whether there are elements of the European experience that may be helpful to us," he said. "Our insurance business is currently very limited, but it's potentially a large income source for us."
David L. Holton, a senior vice president with Wachovia Corp., a Winston- Salem, N.C., banking company, finds himself in similar circumstances. "We're studying the whole waterfront to try to get ready for the changes that will come in this industry," he said.
And who knows? Maybe Congress will eventually grant banks the power to underwrite insurance policies.
"The fee income that comes from distributing insurance polices is only part of the picture,' said Anthony Santomero, a Wharton finance professor who has studied this issues. "The real concern is to get into underwriting to secure a (balance sheet) funding base."
